Volkswacht Bodensee - US consumer inflation holds steady in September

The consumer price index (CPI), a closely watched inflation gauge, rose 3.7 percent from a year ago, the same rate as in August, the Labor Department said.

But on a month-to-month basis, inflation slowed from 0.6 percent to 0.4 percent, according to the latest report.

In addition, the index with volatile food and energy segments stripped out cooled to 4.1 percent -- the lowest in two years.

Slowing inflation will be good news for the Federal Reserve, which has waged an aggressive campaign of interest rate hikes since March last year to lower demand and in turn, the pace of rising costs.

Although Fed policymakers have left the door open to another rise in the benchmark lending rate this year, lower inflation figures could reduce the need for one at their next meeting.

Apart from shelter costs, "an increase in the gasoline index was also a major contributor," to the monthly rise, said the Labor Department.

"While the major energy component indexes were mixed in September, the energy index rose 1.5 percent over the month," the department noted.

- Fed focus -

Despite headline inflation being slightly higher than analysts expected, the energy bump is "not necessarily something that will be of key importance for the Fed at this juncture," EY chief economist Gregory Daco told AFP.

"If you look forward to October, the decline in gasoline prices is actually going to weigh quite significantly on the headline CPI print," he added.

Meanwhile, with core inflation at 4.1 percent, the United States is "heading back to the period before which inflation started to really ramp up aggressively," Daco said.

The month-on-month figure for core inflation remained at 0.3 percent, but economists have noted that this does not mean the downward trend is stalling.

"The forces which drove up core inflation -- excess demand, the supply chain crunch, rapid wage growth, Covid-driven chaos in the rental property market, and soaring food and energy prices -- continue to abate," said economists at Pantheon Macroeconomics in a recent report.

Analysts are also keeping an eye on potentially widening unrest in the crude-rich Middle East, after militant group Hamas launched a surprise attack on Israel over the weekend.

M.Betschart--VB